Bloomberg News

Schweitzer-Mauduit Falls After Cigarette-Paper Ruling Loss

February 01, 2012

(Updates with closing share price.)

Feb. 1 (Bloomberg) -- Schweitzer-Mauduit International Inc., the world’s largest maker of cigarette papers, fell after losing a ruling in a patent-infringement complaint against Julius Glatz GmbH.

Julius Glatz and its LIPtec unit didn’t violate Schweitzer- Mauduit’s patent rights for papers designed to limit accidental fires, U.S. International Trade Commission Judge James Gildea said in a notice today on the Washington-based agency’s website. The findings are subject to review by the six-member commission, which can block imports of products that infringe U.S. patents.

The dispute is over low-ignition propensity papers, which have thick bands that act as “speed bumps” so a cigarette goes out if a person isn’t drawing air through it. Every U.S. state mandates the use of the low-ignition papers as part of efforts to reduce the number of deaths caused by people falling asleep with smoldering cigarettes.

Schweitzer-Mauduit fell 3.8 percent to $66.92 at 4 p.m. in New York trading of 1.27 million shares, almost 13 times the three-month daily average.

Gildea’s full determination will be made public after both companies get a chance to redact confidential information. Glatz lawyer Rudolf Hutz of Connolly Bove Lodge & Hutz in Wilmington, Delaware, said the companies are expected to get copies of the full ruling tomorrow.

Two Patents

Schweitzer-Mauduit, based in Alpharetta, Georgia, claimed Julius Glatz infringed two patents related to a way to make the papers. Schweitzer-Mauduit makes papers under the name Alginex, and has said in regulatory filings that it has additional patents protecting its flagship brand from competitors.

In its complaint, Schweitzer-Mauduit said it has about 23 percent of the global cigarette-paper market and it supplies about 80 percent of the U.S. market for low-ignition propensity papers.

Glatz, based in Neidenfels, Germany, and its LIPtec make and import their own papers, which are sold through Charlotte, North Carolina-based KneX Worldwide LLC, according to documents in the case. The papers are used in the Signal and Skydancer brand of cigarettes.

Hutz said Glatz’s main operations are in Europe, with a small presence in the U.S. He said the company was pleased with the decision.

In October, Schweitzer-Mauduit said it had settled its dispute with one competitor, Germany-based Delfortgroup AG, and its distributor, Astra Tobacco Corp. of Chapel Hill, North Carolina. Under the terms of the agreement, Delfortgroup agreed to pay a minimum of $4 million a year for five years, with additional payments through the life of the patents, some of which last through 2023.

The case is In the Matter of Reduced Ignition Proclivity Cigarette Paper Wrappers, 337-756, U.S. International Trade Commission (Washington).

--Editors: Michael Shepard, Steve Walsh

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net;

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net


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